Structure

4.2 Need and Rationale

4.2.1 Cornmerc~alPerspective
4.2.2 Legal Perspective
4.2.3 Incentive Perspective
4.3 Kinds and unctions of Documents
4.3.1 Commercial Documents
4.3.2 Legal Reguiatory Documents
4.3.3 Documents for Claiming Incentives
4.4 Standardised Pre-shipment Export Docu~nents
4.5 Let Us Sum Up
4.6 Key Words
4.7 Answers to Check Your Progress
4.8 Terminal Questions

After studying this unit, you should be able to:

I
describe the reasons for documentation in export trade
explain functions of different kinds of documents needed for performance of export
contract
explain the need for legal regulatory documents for doing export business
i fill up main commercial documents
describe the need and advantages of simplified export documents.

I 4.1 INTRODUCTION

respective rights and duties of exporter and i~nporlcr.In this unit, you will learn various
perspectives, kinds and functions of export documents. You will also learn about the
documents needed for fulfilling the commercial obligations of an exporter and various legal
and other documcnts involved in export trade.

4.2 NEED AND RATIONALE

Export documentation is cnnmonly considered to be the most complex and'difficult part of
overseas marketing. You may have come across such comments as "export is a botheration
1 because one has to fill-up so many forms". Such comments tend to discourage people from

Why is documentation needed in expo11 business ? Answer to this question lies in the nature
of the business relations between the exporter and the importer, who are operating from two
countrie: If one is doinlr donlestic business. one knows or car1 easilv know the commercial

contracts. However, when the buyer and the seller are operating in two countries, the
Fundamentals o f commercial practices and legal systems are different. Thus, for ensuring that the respective
Export Business
interests of the buyer and the seller are protected, certain documentary formalities become
essential. Similarly; every country has,its own laws governing imports and exports.
Consequently, the exporter has to comply with laws in his country through documentary
formalities. At the same time, he has to send some documents to the importer which will
enable him to take possession of the goods after getting permission from the concerned
government department (i.e. the customs authorities). There is yet another reason for
docu~nentationin export trade. Such documentation 1s linked with the claim of export
incentives given by almost all countries world over. Since most of these incentives are to be
claimed after shipment, the exporter has to give documentary proof of the fact of s%ipment.

Documentation formalities are necessary to enable the importer to get the contracted goods
and the exporter to get sale value as well as to secure export incentives. In other words, export
documents are needed to comply with commercial, legal and incentive requirements.

Let us now discuss these three perspective in greater detail to u n d k t a n d the rationale of
different documents.

4.2A Commercial Perspective

Trade between two business firms located in different countries begins with the conclusion of
an export contract. Under the contract, the duty of the exporter is to ship the contracted goods
in the agreed form (e.g., packing) and by agreed mode of transport as well as according to
agreed time schedule. On the other hand, it is the duty of the importer to remit sale value to
the exporter according to agreed terms of payment. In this process of physical movement of
goods from the exporter to the importer and remittance of sale value in the reverse order,
neither the exporter nor the importer is personally and physically involved. Instead goods ard
handed over to a shipping company or an airline which issues a receipt for these goods.
Further, since goods in transit may be damaged or lost due to some accident, the exporter may
be required to get an insurance policy. While these two documents will protect the interpts of
the importer, the exporter will ensure that these documents are not in the possession of h e
importer unless he has either paid for the goods or he has made a promise to make payment at
a later date. For this purpose, physical possession of the goods will be linked with the
acceptance of a payment document by the importer. In actual practice, a set of documents
given proof of shipment and cargo insurance coverage along with a bill for payment is sent by
the exporter to the importer through the banking channel. This set of documents symbolises
ownership in goods. This will be handed over to the importer by the bank in his country
which he has received it from the bank in the exporting country only when he has honoured
the bill. In other words, the importer will get delivery of the goods from the carrier on the
bas'is of the transport document which is obtained through the bank, after he has complied
with the agreed t e r n of payment.

4.2.2 Legal Perspective

Besides commercial necessity, documents for exports have a legal perspective. All over the
world, laws regulating export-import trade as we11 as movement of foreign exchange have
been enacted. In some countries, the regulations are few which are enforced through simple
procedural and documentation formalities. In other countries, the regulations are many and
the enforcement procedures are complex.

Why should there be regulations in foreign Uade ? There is perhaps no country in the world
where movement of goods and money is absolutely'free. The minimum regulations that one
can think of is the one to record the movement of goods from and into a country. For this
purpose, the exporter has to declare on a document the details of goods being exported by
him. Other than this basic liiinimum requirements, the governments all over the world
,sts and
regulate movement of goods to protect political, economic, cultural and other interP
for implementing trade agreements with other countries.

Some countries do not have political relations with the otheq. As a result, goods originating
from such a country are not allowed to be imported. Thus, a country which does not pemit
36 flow of goods from certain countries has laid down the requirement of certificate of origin